Video Conferencing a High Priority, but Equipment Sales Decline

IDC analysts said global economic challenges and the transition to software and cloud solutions are impacting video equipment sales.

Interest in video conferencing—particularly cloud- and software-based solutions—remains high even as sales of hardware continues to tumble, according to IDC analysts.

The trend in the video conferencing equipment space has been downward over the past several quarters, and that trend continued in the fourth quarter of 2013, the analysts said in a Feb. 25 report. The market is under pressure from a number of different directions, from an uncertain global economic picture to deep federal budget cuts in the United States, they said.

However, organizations continue to see video conferencing as a way to improve employee productivity and collaboration between workers.

"Video as a key component of collaboration continues to place high on the list of priorities for many organizations," said Petr Jirovsky, research manager for IDC's Worldwide Networking Trackers. "IDC believes that among the challenges customers are currently trying to work through are a market transition and determining exactly when and how to provision their video deployments as more software-centric and cloud-based service offerings become part of the enterprise video market landscape."

In the fourth quarter 2013, spending on video conferencing equipment fell 17.9 percent from the same period in 2012, coming in at about $592 million, according to IDC. For the entire year, revenue hit $2.26 billion, about a 13.1 percent decline from 2012.

The industry continues to shift to more software- and cloud-based solutions as organizations deal with such trends as greater employee mobility and bring-your-own-device (BYOD), both of which are leading to increased demand from workers to be able to participate in video meetings from anywhere and on any device, from smartphones and tablets to PCs, room systems and high-end immersive solutions.

Established players like Cisco Systems, Polycom and LifeSize Communications are aggressively adapting their offerings to become more software-based, enabling them to be accessible through the cloud and via mobile devices. At the same time, a growing number of smaller vendors—from Vidyo and Blue Jeans Network to Zoom Video Communications and Fuzebox—are offering software-only solutions, most of which can also be hosted in the cloud.

Polycom earlier this month introduced offerings that range from virtualized software to high-end hardware. RealPresence One is an offering that brings together much of the vendor's offerings—such as video, voice and content collaboration—under a single umbrella that is available via a subscription. Meanwhile, organizations can leverage RealPresence Platform, Virtual Editions parts of the platform as virtualized software that can run on x86 industry-standard servers in the data center.

The company is also offering RealPresence Immersive Studio, a high-end hardware-and-software solution designed for major video conference rooms that includes up to three 84-inch flat panels that create what officials call a "video wall" as well as another 55-inch panel that can be used to display documents. In addition, participants can share content from such mobile devices as smartphones, tablets and notebooks.

At the same time, companies likes Fuzebox and ClearOne made moves this year to improve their cloud-based video conferencing capabilities.

However, beyond the transition toward software, cloud and mobile, video conferencing faces other challenges, according to Rich Costello, senior analyst for enterprise communications infrastructure at IDC.

"The lingering macroeconomic situation—including softness in emerging markets, the recession in Europe, and the sequestration in the U.S. (i.e. budget cuts)—produced some cautionary IT spending that impacted year-over-year video equipment revenue growth across all the regions in 4Q 2013," Costello said in a statement. "In addition, and most significantly, we are continuing to see the impact of lower-cost systems, software-centric products, and cloud-based service offerings on the enterprise video equipment market."

Cisco, the leader in the space with a 44.3 percent share of the market, saw video equipment revenue fall 20.8 percent over the same period in 2012, while Polycom's revenue fell 13.4 percent. Polycom is second behind Cisco, with a 24.9 percent share. Huawei Technologies, which is looking to grow its presence in enterprises in the United States and elsewhere in several IT segments, saw revenue grow 0.8 percent in the fourth quarter. The giant Chinese tech vendor holds 10.8 percent of the global video conferencing market, according to IDC.